Bookkeeping is an important part of any small business. It helps you keep track of your finances, which is key to staying on top of your cash flow. It also prevents you from making costly errors down the road. That being said, it’s inevitable for things to get messy from time to time.
There are several reasons why your financial books might get messy. If you run a small business that requires more reporting, you will have messy financial books. As your business grows and requires more money, it’s easy to let your financial books fall to the wayside.
Having messy financial books can be frustrating. It makes you feel that you’re missing something and will never figure out where your money is going. When faced with a messy financial books situation, you should look at your bookkeeping system. A bookkeeping clean-up checklist contains a list of tasks you need to complete to clean your messy financial books.
Bookkeeping Cleanup Checklist
If you’re consistently making poor financial decisions, it could be a sign that you need to clean your financial books and make some major changes. A bookkeeping clean-up checklist serves as a roadmap, guiding you through the process of cleaning your books. Here are a few tips to help you clean up your accounting records.
Identify the Problems in Your Books
To figure out where your money is going, you need to track your transactions. This is a good way to identify inefficiencies in your financial books. For example, if you consistently overpay employees, you could be losing money due to payroll taxes.
A detailed look at your financial books helps you identify the problems, such as a lack of details in your records. It also helps you identify any issues that may be causing your financial books to be messy. Some of the potential accounting mistakes include:
- Miscoding transactions
- Mixing personal and business accounts
- Misplacing financial records
- Forgetting important tax details
Separate Your Personal and Business Accounts
Separating your personal and business accounts helps you track your transactions separate from your business transactions. It prevents you from making financial decisions based on your emotions and forces you to take a step back and ask yourself if the purchase is really necessary.
Separating your personal and business accounts makes it easy to keep track of your expenses for tax purposes. Keep track of expenses on your business account, separating office expenditures from operational and inventory expenses. Keep all your receipts safe as they help your bookkeeper have a comprehensive collection of all business transactions, saving you time and stress.
In addition, keeping your personal and business transactions separate improves your financial security. It prevents instances where you use your personal finances on your business, putting you on a financial gamble.
Signing personal guarantees for leases and loans for your business is a good idea when your business is young and hasn’t established a strong credit rating. However, you should avoid personal guarantees and build strong credit to give lenders confidence that your business can pay the debts.
Track Every Transaction
The first step in cleaning up your books is identifying where the problems are. Are you consistently overspending? Are you making impulsive purchases without having a plan for how you’ll pay for them? Are you buying on credit, which is only making things worse?
You should list every transaction that occurred in the past year. If you’re having trouble remembering, make a note of the due date for each transaction. Doing this helps keep track of your cash flow.
Reconcile Your Business Books
Another important step in cleaning up your books is reconciling your business books. The process involves matching your bank statements and other records with your financial books. Reconciling your books helps you identify where the errors are.
Reconciling your books with your bank statements helps you identify and correct the errors in cash transactions that you might have missed in your books. In addition, it ensures whether or not you have done everything right by matching the bank records by analyzing the cash in your bank account. Reconciling your business books:
- Prevents slow transaction
- Prevents the risk of typographic errors which might occur during typing
- Deals with ambiguities of the first stages of starting any business
Go Paperless with Bookkeeping Software
Bookkeeping software can save you time and help you stay organized. It can also help you find mistakes and inconsistencies in your accounting data, which can help you make better business decisions. It’s also a good way to keep track of taxes, which can be complicated without the right software. In addition, the software can also help you manage your finances better, which can help you save money and invest better over the long term.
Standardize Your Processes and Reporting
Standardizing your financial processes and reporting catches missed risks and opportunities and increases cash flow. When done right, standardizing and reporting your bookkeeping processes helps you understand where your business stands financially. You can use this information to allocate resources more effectively and make informed decisions.
In addition, standardizing and reporting your processes avoids the headache of trying to keep up with where you are in your recordkeeping, which can save you time and energy.
Outsource Your Bookkeeping If You Need Help
If you are not sure how to do the bookkeeping yourself or need help with bookkeeping, you should consider outsourcing. Outsourcing your bookkeeping is simple and helps keep your financial books clean, reducing your tax burden.
A professional bookkeeper knows how to clean your financial books, eliminating all the mess you might have made when personally running your business. To get help with your bookkeeping services, read our guide to finding the best bookkeeping service.
Your bookkeeping is a crucial part of your business. It tells you where your money is coming from and where it is going. A good bookkeeping system will also help you avoid mistakes or regulatory issues, and can give you better financial insights to drive better decision making.
But while your bookkeeping is a key element of your business, it’s often the most neglected. Many small business owners only record their transactions when they happen, which means they don’t have a clear picture of where their money is coming from and going.
Follow the above bookkeeping cleanup checklist to keep your financial books in order. If you need help, reach out to Visory and get started today.